Valuation of a Company
Starters’ CFO presents
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Speaking Engagements
Contents
Determining the Value
Customer traction
Reputation
Industry Hotness
Prototypes
Revenues
Distribution Channel
Factors responsible
Startup Valuation is a Scientific Art!
Science
Art
Methods of Valuation
Valuation of a Company
Asset based Business Valuation
Income based Business Valuation
Market based Business Valuation
Discounted Cash Flow Technique
Value that is based upon the theory that the value of the business is equal to the present value of its projected future benefits
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Step1- Analyze historical financials and operations. Make normalisation adjustments as necessary to develop baseline for future years
Step2- Prepare or review cash flow projections(revenue, expenses, capex, working capital)
Step 3- Develop appropriate discount rate and determine present value of the projected cash flow
Step 4- Adjust as applicable for any non-operating assets or liabilities
Financial Modelling
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Historical Information
Analyze relationships, make assumptions
Project Sales, costs , other
Develop complete financials and analysis
Run scenarios, change assumptions
Discounted Cash Flow Technique
Relative Pricing Technique
Relative Pricing Technique
Valuation by Stage Method
Some ambiguous values are set by the investors, depending on the venture's stage of commercial development. The further the company has progressed along the development pathway, the lower the company's risk and the higher its value.
Estimated Company Value | Stage of Development |
$250,000 - $500,000 | Has an exciting business idea or business plan |
$500,000 - $1 million | Has a strong management team in place to execute on the plan |
$1 million – $2 million | Has a final product or technology prototype |
$2 million – $5 million | Has strategic alliances or partners, or signs of a customer base |
$5 million and up | Has clear signs of revenue growth and obvious pathway to profitability |
Berkus Method
Assigns a range of values to the progress startup business owners have made in their attempts to get the startup off of the ground.
Choice of Valuation Methodologies in a given situation...
Relevant Approaches
Compliances at the time of funding
Term Sheet
Shareholder Agreement
Private Placement
of Shares
Valuations
How does fundraising work??
Sources of Startup Funding
Who will fund you?
Startups rarely get money from bankers but only from shareholders
So let’s focus on shareholders
Who are the shareholders for each step?
Pre Seed�<100K
Seed�100K-1.5 M
Series A & B�500K- 5 M
Series C+
Personal Savings�Friends & family�Grants
Venture Capitalists�Business Angels�Angel Funds�Wealth Managers
Venture Capitalists�Business Angels�Angel Funds�Wealth Managers�Corporate Funds
Venture Capitalists�Growth Funds
M & A�IPO
Shareholders
In each round you give around 20-30% of your remaining capital, except in pre-seed when you give around 5-10%
Top Venture Capital Firms in India
SAIF Partners
IDG India Ventures
Inventus Capital Partners
Blume Ventures
Norwest Venture Partners
Fidelity Growth Partners
DFJ India
Canaan Partners
BESSEMER Venture Partners
Intel Capital India
Nexus Venture Partners
Accel Partners
Sequoia Capital India
Helion Venture Partners
Thanks!
Contact us:
Starters’ CFO private Limited
B1, Derawal Nagar, Model Town
New Delhi-110009